While much of the nation was riveted Election Day by coverage of who would win control of the U.S. Congress, Pasco County voters quietly, and overwhelmingly, approved a penny surtax for the third time.
The levy, dubbed Penny for Pasco, is a sales tax that raises money for schools, cities and county government. When this just-approved 15-year term ends in 2035, more than $1.9 billion will have entered into county coffers over nearly three decades.
Of the money earmarked for county government, 20% goes to economic incentives.
For Pasco’s Economic Development Council, the windfall has allowed it and the county to develop a little-known program that helped the county capitalize on rapid growth that’s turning — or maybe a better word is turned — the once quiet bedroom community north of Tampa into a booming economic powerhouse in the past decade.
“Back in the day,” says Bill Cronin, president and CEO of Pasco’s EDC, “you would see this long line of cars coming from Pasco down Suncoast (Parkway) and (Interstate) 75 every day at rush hour going downtown. Now, you actually see it coming both ways. So yeah, it’s a very interesting place we’re in right now.”
Risk and reward
What the county did is create a forgivable loan program to help developers build Class A office and industrial buildings on spec. The program was aimed at creating space that would attract companies from six targeted industries: advanced manufacturing; aerospace, aviation and defense; business and professional services; high technology; life sciences and medical technology; and logistics and distribution.
A portion of the loans were made forgivable because the types of industries the new spaces would attract met the county’s needs in terms of incentives or wage levels, Cronin says.
While using taxpayer generated money to build on speculation may seem risky to some, the EDC foresaw a demand for, and a lack of, space for companies seeking to expand. The county’s proximity to Tampa, officials saw, made it a natural place for growth and they wanted to be prepared for the demand as it recruits companies to the area.
It was a build-it-and-they-will-come mentality that’s shown signs of success.
To date, the county has helped fund at least five spec projects that have been built or are near completion totaling about 1.48 million square feet of space. These are:
54 Crossings, a 120,000-square-foot office development
The Edison, a two building 150,000-square-foot office development
North Tampa Bay 75 Business Center, an 850,000-square-foot industrial space
Suncoast Business Center, a 360,000 square feet spec flex-industrial project
Asturia Corporate Center, a 235,000 square foot flex-industrial project
Cronin says the EDC came up with the idea for helping fund spec projects because a condition for the economic development portion of the Penny for Pasco program was the money could not be used to supplant existing programs. This meant the EDC had to do “something creative, new and different.” And whatever it came up with had to give Pasco a competitive edge.
So Cronin and his staff began to look at what the county needed to spur economic development and what was not already getting help or working.
The EDC was not included in the first round of Penny for Pasco funding, which ran from 2005 through 2014. Its participation began in the second round, which was approved in 2012 and runs between January 2015 and December 2024.
The department ended up focusing on the need for space product to attract companies, mostly because there wasn’t enough. Everyone knew this was a fast-growing market, Cronin says, but institutional capital was not recognizing Pasco as a market they wanted to invest in.
“The whole purpose was, how do you kickstart the market so that developers will consider building?” Cronin says. “I think that probably the most important message is that if you’re lacking product, sometimes a community has to kick start that.”
Offer a buffer
What the EDC needed to do was find a way to mitigate the risk for not just institutional investors but for private financiers as well.
To do this, the department went to developers and asked what they needed help with and how to alleviate some of the concerns that kept them from building on spec in Pasco. What EDC officials discovered was that the issues lay in the time between construction and the leasing, because at the time building costs were much higher than lease rates.
The loans program allowed for developers to relieve the pressure to sell quickly. It also gave them a buffer to be able to offer the space speculatively instead of waiting for a buyer and then building.
A spokeswoman say Pasco’s EDC does not run the program but helps bring the product to market to help recruit the targeted industries.
In the days before 65% of Pasco voters approved the third round of Penny for Pasco Nov. 8, Cronin reported leases were being signed and tenants were making plans to move in at several of the properties. He adds that at one of the office buildings a lease had been signed by a nationally known company taking at least one entire floor.
As importantly, he says, the county is starting to see developers coming in with plans to build on spec without using the Penny for Pasco money.
“It did what it was intended to do and that was really to be a catalyst to kickstart the market,” Cronin says. “We don’t want to be in the spec building business for a long period of time. Government really wants business to handle business.”
Louis Llovio is the commercial real estate editor at the Business Observer. Before going to work at the Observer, the longtime business writer worked at the Richmond Times-Dispatch, Maryland Daily Record and for the Baltimore Sun Media Group. He lives in Tampa.